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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists from all backgrounds expect a devaluation of the national currency after the election concludes. President Javier Milei has placed a limit on the peso to control soaring price increases and currently it is overvalued and reserves are exhausted, causing the national economy sluggish as consumers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing forceful policies to wrestle back control of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to control inflation in check. This plan shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately after a shaky result in local polls and multiple graft allegations. Only large-scale economic support from abroad has averted what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to enact the “will of the people” in the face of elite opposition.

Farage to date committed few policies to paper except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the central bank, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a pledge for large tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

The opposition aims this position will enable it to depict Farage as intending to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by affluent backers calling for tax cuts and reduced rules, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, research indicates neither left nor right populists often perform poorly when faced with practical difficulties (although each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, over the long term, gross domestic product per head is often a tenth less in countries governed by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, though, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, versus four for mainstream politicians.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.